Apple Settles Anti-Trust Lawsuit for $400 Million

Apple has agreed to refund over $400 million to consumers who were victims of the company’s plan to raise prices of digital e-books sold on its devices.  The settlement, which is contingent on a 2nd Circuit Court of Appeals judge affirming a ruling against Apple, will wrap up the multi-million dollar anti-trust lawsuit filed by consumers who felt the tech giant had colluded with electronic publishers to force Amazon to raise e-book prices.

Apple’s E-Book Anti-Trust Case

Apple and associated publishers were accused by the Department of Justice and several states of working together to force – maker of the Kindle – to raise its price point to match hardcover titles by allegedly adding $2 - $5 to the price of each e-book – costing consumers up to hundreds of millions of dollars over the course of the scheme.  The alleged plot arose when Apple entered the e-book market with the 2010 launch of its iPad, giving the company reason to compete directly with Amazon.  Apple offered to sell e-books at the price the publishers set, meaning that Amazon could no longer price most e-books at $9.99 because publishers had a company willing to sell at whatever price they determined.

Following the investigation, US District Court Judge Denise Cote agreed with the DOJ and found Apple guilty of violating anti-trust laws, giving consumer advocates the opportunity they needed to pursue monetary damages in a civil lawsuit.  After Judge Cote’s ruling, digital book consumers filed a lawsuit against Apple seeking over $840 million in damages caused by the company’s anti-trust activities.  Alleging that the price fixing schemes cost consumers $280 million, plaintiffs suing Apple sought treble damages (calculated at three times actual damages) to arrive at the $840 million total.

Apple Agrees to Settle Anti-Trust Lawsuit

This week, Apple avoided trial in the civil anti-trust lawsuit by settling for $400 million.  The settlement comes after the publishers who allegedly colluded with Apple settled consumer lawsuits for $166 million earlier this year.  Consumers who purchased e-books distributed by the publishers associated with Apple’s anti-trust activities between April 1, 2010 and May 21, 2012 will be eligible to receive a portion of the settlement.  Although the company maintains that it did not engage in an illegal price fixing scheme, the $400 million settlement closes the matter without exposing Apple to the full $840 million judgment.

New York Attorney General Eric Schneiderman lauded the news saying, “This settlement proves that even the biggest, most powerful companies in the world must play by the same rules as everyone else.”  The settlement was finalized after an announcement almost a month ago that Apple had reached an agreement in principal.  As the details came together, Apple agreed to close its lawsuit without admitting to any wrongdoing – a common condition of civil settlements paid out by large companies.

Apple’s Settlement Contingent on Appeal

Consumers benefiting from Apple’s $400 million settlement cannot bank on the money yet because the agreement is contingent on the results of Apple’s appeal of Judge Cote’s finding that the company violated anti-trust laws.  The appeal, which will likely be heard by the United States Court of Appeals for the 2nd Circuit sometime in the next year, may overturn Apple’s conviction and either nullify or reduce the award. 

Should Apple win its appeal, it will need to pay only $50 million if there is a retrial on the anti-trust case, and nothing if the 2nd Circuit determines the company did violate any anti-trust laws.  Of course, if Apple loses the appeal and Judge Cote’s finding that the company violated anti-trust laws is affirmed, the $400 million settlement will be enforced.  Apple will also need to pay an additional $50 million in attorney’s fees should its appeal fail.  

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